Still don't think the US will have a soft landing! Hedge funds are selling industrial stocks at an astonishing speed.

Regardless of whether it is referred to as a "rebirth" by the media or praised as a perfect decline in inflation, a familiar investment theme is emerging: Wall Street is once again betting on a soft landing for the US economy.

Despite the Federal Reserve's ongoing tightening, US stocks continue to rise, with hopes that the Fed can bring inflation back to its target without crushing the US labor market or plunging the economy into chaos.

However, Goldman Sachs' Prime Brokerage (PB) business has observed a phenomenon in investment fund flows that contradicts the optimistic view of a soft landing: aggressive hedge funds are selling industrial stocks. Industrial stocks have traditionally led the way during economic upcycles. The massive unwinding of industrial stocks by hedge funds implies that the smartest money in the market does not believe in the idea of a soft landing.

John Flood, a partner and senior trader at Goldman Sachs, previously stated that he likes to go long on industrial stocks because data from Goldman Sachs PB shows that fast money has been flowing into industrial stocks over the past two months. He also pays attention to mutual funds, a group that pursues a pure long strategy, as they have started buying higher-quality industrial stocks, similar to Goldman Sachs' recent discovery that they have been buying semiconductor industry stocks in large quantities.

According to data from Goldman Sachs PB last week, industrial stocks were one of the most heavily sold sectors in the US stock market, with the scale of long selling being twice that of short covering.

As of last week, industrial stocks have experienced four consecutive weeks of net selling, with eight out of the past nine weeks being net selling weeks. The scale of net selling last week exceeded 83% of the levels seen in the past five years.

Almost all sub-industries of industrial stocks were net sold last week, with the highest nominal selling values seen in the aerospace, electrical equipment, machinery, and professional services sectors.

After last week's selling, the long/short ratio of US industrial stocks dropped to 1.59, hitting a five-year low and significantly lower than the year-to-date high of 2.01% set at the end of February. The over-allocation level of industrial stocks compared to the S&P 500 index is 0.8% higher, much lower than the year-to-date high of 2.8% in mid-March and lower than 51% of the levels seen in the past five years.

Earlier this month, when US stocks were "celebrating" the economic recovery, bond fund giant Pacific Investment Management Company (Pimco) issued a warning, stating that preparations should be made for a global economic "hard landing" as central banks continue to have the motivation to raise interest rates. The longer the lagging effects of these policies persist, the greater the risks of extreme economic prospects. Currently, defensive assets such as high-quality government and corporate bonds are favored.

Over a week ago, Wall Street Journal mentioned that after the US released CPI and PPI data for June, which both exceeded expectations and showed a slowdown, the market became even more optimistic about the prospect of a soft landing for the US economy. When he was the CEO and Co-Chief Investment Officer (CIO) of Pimco, Mohamed El-Erian, Chief Economic Advisor of Allianz Group, bluntly stated that since the market generally believes that the US economy can achieve a "soft landing," there is no need to confront this view. However, he also pointed out that if the Federal Reserve tightens excessively, an economic recession is also possible.